“Amazon.com Inc. (AMZN), the world’s biggest online retailer, and discount Internet sellerOverstock.com Inc. (OSTK) lost a challenge to New York’s Internet sales tax law as the state’s highest court rejected their arguments that it was unconstitutional.
Amazon, based in Seattle, and Overstock.com, based in Salt Lake City, sued the state’s Department of Taxation and Finance separately in 2008, seeking to overturn a law requiring retailers to pay taxes if they solicit business in New York through a link to a website.
The companies argued that the law violated the Commerce Clause of the U.S. Constitution by subjecting online retailers without a physical presence in the state to sales and compensating use taxes. It violated the Due Process Clause by “creating an irrational, irrebuttable presumption of solicitation of business within the state,” they said.
Justice Eileen Bransten dismissed the suits in January 2009. An appeals court in Manhattan affirmed her rulings in 2010, and the state Court of Appeals agreed today, saying the companies “established an in-state sales force” through agreements with affiliates who received commissions for posting links on their websites directing users to Amazon.com or Overstock.com.